Software Licensing: The Hidden Truth

It’s a hoop we’ve all been jumping through for years: agreeing to lengthy license agreements that we never read. Few people ever read them because they’re long and difficult to understand. License agreements are generally written for lawyers, not regular people, and are meant to be “interpreted” rather than understood. It’s time we started reading these licenses and determining if we really agree to them or not. Indeed if we do not agree to the terms, we should not be using the software. Read on for an in-depth explanation.

A license is basically an agreement (not a legal contract, although software companies often try to turn it into one by making you perform an act of agreement) between the end user and the software manufacturer, and it outlines the terms by which we are allowed to use the software sold or given to us. Generally we’re forced into agreement with a software license by an anonymous act, not a genuine signature or verbal agreement. Acts of agreement generally include breaking a clearly labeled seal to open the software package or disk bundle, clicking on a button in a program that asks us if we accept the license terms, or simply by using the software our agreement can be assumed. So when you install a new software program and use it you are knowingly or unknowingly agreeing to the terms of the license. But do you know what that license really says, and what you are and are not allowed to do with the program?

Microsoft: An Example

While Adobe, IBM, Apple, Corel and Macromedia (among others) all have similar agreements for most or all of their software products, Microsoft is the most widely-used proprietary software company in the world, so it makes sense to use them as a specific example of a typical proprietary license agreement. Proprietary in this sense means that the software is licensed (not sold) by a company that has exclusive rights over it. That means that although you may have purchased a retail box with fancy logos on the front and a manual and CD media inside, you do not own these things. Rather you license their use from the company that owns them.

For this example I’ve examined the Outlook XP license; Outlook has been available as a standalone product for some time, although most people generally get it as part of the Microsoft Office suite. The license is, as far as I can tell, identical to the one that governs all of Microsoft Office XP.

Every company has a different name for their license. Microsoft calls theirs the End-User License Agreement, or EULA for short. Without further ado, here is a mostly complete list of restrictions that the EULA imposes on people who buy and use Outlook or Office XP:

  • You can install and use one copy of the software on a single computer. This implies that you may not install two copies of the software on the same machine (as would be useful for people who dual-boot Windows 98 and Windows XP or some Windows combination similar to that). Microsoft allows a second copy to be installed on a portable machine, but only if the licensee is the primary user of both computers.
  • You can install the software on a network for several client machines to use, but each client machine has to have its own license in addition to the license for the server. That means you need to buy a separate copy of the software for each computer that connects to the program on the network. Even though you have licenses for each client machine, you are not allowed to use them to access the server concurrently — in other words you can only use one machine at a time to use the software.
  • The software package may contain “media elements” such as movie clips, clip art drawings, photos, etc. You aren’t allowed to sell these media elements as standalone items or as part of a package. If any media elements contain people, names, logos, initials or other trademarked, copyrighted, or rights-reserved materials, you can’t use it for commercial purposes. You can’t create “obscene or scandalous works” with the media elements included with the software. Third parties are unable to distribute standalone copies of the media elements, and if you use them in a commercial project you must include proper copyright notices for the media elements. Lastly, Microsoft won’t be held liable for any lawsuits or damages that may arise by modifying the media elements. With all of this nonsense, it would seem less of a burden to simply not include “media elements.”
  • Microsoft specifically states that all rights that are not specifically granted to you are reserved by Microsoft. This is to cover up loopholes that might otherwise allow something obscure yet harmful.
  • Product activation is mandatory; you are required to participate in Microsoft’s activation scheme.
  • The product may include a copy protection scheme as well, which would prevent you from making copies of the software. Under the Digital Millennium Copyright Act it is illegal to attempt to defeat this scheme. You are allowed to make a backup copy of the original media only if the program requires the media in order to operate. Otherwise your original program CD or CDs count as backup copies.
  • Microsoft forbids you to decompile, reverse engineer or disassemble the software in any way.
  • If you buy the whole Office suite, you can’t break it up and put different programs on different machines. The suite itself is treated as one individual product.
  • You’re not allowed to rent, lend, loan or lease the software to anyone, and you can’t use the software for commercial hosting purposes.
  • If you call Microsoft for product support, they will use your customer information for “business purposes.” The EULA says that no “personally identifiable information” will be used, if collected.
  • You may transfer your license to someone else, but that person may not transfer it to anyone else. In other words the license can be transferred only one time. If you want to transfer the license to someone, that person must agree to the EULA.
  • The EULA may be terminated by Microsoft if you violate its terms. If that happens, you must destroy all copies of the software and accompanying materials and components. That means you can’t keep the software you bought if your license is terminated by Microsoft.
  • If you’re upgrading, you have to have a properly licensed qualifying product to upgrade from. Once you upgrade, the old program’s license is terminated in favor of the new one. So if you upgrade to Outlook XP from Outlook 97, your old copy of Outlook 97 can no longer be used. I’m not sure if you’re supposed to destroy the old copy or not — the license isn’t too clear on that.
  • You’re not allowed to copy the product documentation, but if an electronic edition of the documentation is provided you are allowed to print out one (and only one) copy of it for yourself.
  • The software is warranteed for 90 days from the date of purchase. The warranty covers virtually nothing at all; all that is warranted is that the software will operate as the documentation says it will. If it doesn’t, Microsoft will either fix the software for you or refund what you paid for the software (the choice is theirs to make). You have to mail them the software and the receipt at your own expense. Updates, service packs, hotfixes and other add-ons and extensions are not warranteed at all.
  • Microsoft will not be held liable for any damages resulting from using or installing the software, even if it doesn’t work as stated in the documentation. Furthermore although Microsoft makes and sells this software for a profit, it doesn’t guarantee that the software is safe to use, secure from intrusion, free of viruses or harmful programming mistakes, or that it will be at all useful to you. So in other words if you buy Microsoft Outlook expecting it to function as promised, but instead it puts a virus on your system, deletes all of your personal data and overwrites your motherboard’s BIOS with garbage (thereby ruining the motherboard), the best you can hope for from Microsoft is US $5 or the purchase price of the software, whichever is greater. This is very poor corporate accountability; companies that make and sell physical products (cars, toys, other “real” things) must be held liable for any damage it does due to negligence on the part of the company, but somehow Microsoft wants to absolve themselves of the responsibility of making a safe product. Fortunately some states have laws which force corporations to be held liable for damages in such instances; the EULA cannot override the law. If you’re in Canada or some other country outside of the US, check your local laws to see if they have such a protection for consumers.
  • The warranty does not cover damage to the software via accident, abuse, misapplication, abnormal use, or viruses. I’m curious as to what “abnormal use” refers to; I wonder if Microsoft software has a maximum duty cycle?

As thorough as the license is, it’s odd to find a typo, yet there certainly is one in item 12 where “SHALL” has only one L. I’m not generally one to criticize the editing efforts of others, but it’s almost surreal to see an error as basic and silly as this in a document that is so precise and particular.

Do You Agree?

It may be that you don’t find these terms all that disagreeable. In that case you wouldn’t be violating your morals or ignoring your conscience by using this software. However if you disagree with even one point of this EULA you should not accept its terms, which generally means you can get a refund for it if you bought it. If you didn’t buy the software — if someone gave you a copy or if you downloaded it from a filesharing service — then you’re breaking the law and could face civil penalties of up to US $150,000 or criminal penalties of US $250,000 and up to five years in jail. All that for sharing your software with your friends and family.

So what if you don’t agree? What then? You quit the installation program, repackage the software and return it to the manufacturer (not the reseller or the hardware manufacturer if you bought the software with a computer) for a refund. As for what you’ll be using instead of proprietary software like Outlook, there are a lot of programs out there that are licensed under less restrictive licenses like the BSD License or the GNU General Public License (GPL). These programs are free to use, modify, sell, copy and redistribute — a quality known as Free Software. That’s free as in the licensing terms, not as in price. While you generally aren’t charged a fee for downloading or using Free Software, if you find it useful you should donate a contribution to the project that maintains and develops the software you’re using. If you’re not sure, you can donate directly to the Free Software Foundation. In many instances they’re as good as or better than their proprietary competitors.

An excellent replacement for Outlook XP would be Aethera, a Free Software PIM/email client that isn’t susceptible to many of the viruses that Outlook and Outlook Express are. If you’re looking for a word processor, spreadsheet and presentation program suite like MS Office XP Standard Edition, makes production-quality replacements for Word, Excel, and PowerPoint. There are several other alternatives that are worth exploring, and most of them are free to download and use.

A Pirate’s Life For Me?

The things I personally find most disagreeable about the EULA are the restrictions placed on loaning or selling the software and the fact that they’re backed with civil and criminal penalties. It shouldn’t be a felony for me to give a copy of my software to someone in need. Not using this software is a matter of integrity for me; if I don’t agree to the license, I’m not going to lie and say that I do just so that I can use it. I’ve lied to Microsoft and Macromedia and Adobe and others for years — I’m sick of it. I don’t agree to their restrictive licenses and I refuse to use their software. Amazingly, my life has not been upheaved as a result, and I feel much better about my situation now that I’m using Free Software instead. Now I can give out copies of my software to those in need without the pang of conscience telling me that I’m lying and breaking the law.

Illegal copying and distribution of software is called “piracy” by the big software companies. When you install your copy of a program onto a friend’s machine, Microsoft prefers to use the term “softlifting” to describe your actions. This is an effort to make it sound like you are stealing or “shoplifting” something from them. You are not stealing in this instance, or committing a true act of piracy, but you are breaking the law. Microsoft says that software “piracy” accounts for an industry loss of US $13 billion annually. This is a complete fabrication — this number is a projection based on an estimate of how much proprietary software is illegally installed, a number which is impossible to accurately guess. Many industry experts feel that this estimate is far too high because of the arbitrary method by which it is calculated. This also wrongfully assumes that all of the people who illegally installed proprietary software would have otherwise paid for it. In my experience if it were impossible to illegally copy and install software in this manner, most people would find other, cheaper (or free) alternatives or they would simply go without it. Microsoft’s (and other big software companies’) counter-argument to this is the assertion that proprietary software would be more affordable if illegal copying and use didn’t exist, because software companies would be making more money. Their logic is laughable — what they’re saying is that they’ll charge us less money if we give them more money. We already know that trickle-down economics (or as George Bush Sr. called it, “voodoo economics”) doesn’t work; we don’t need the software industry to show us more proof. The only thing that makes proprietary software cheaper is strong competition from a variety of smaller entities.

The Reality Of “Piracy”

But despite their claims, I don’t believe that Microsoft is really interested in stopping software “piracy.” I always suspected that they had a secret interest in “piracy” because it makes their software more ubiquitous and has been an effective method of making products like Word into industry standards. The second point is that very few people are ever arrested for software “piracy” and I can’t find evidence of any home users being prosecuted for “softlifting” despite its widespread and well-known practice. But recently something happened that fortified my suspicion: some of the source code for Windows 2000 was leaked onto the Internet. It immediately appeared on filesharing services where any number of proprietary programs can already be found. Microsoft responded by posting notices on these P2P networks informing people that they would be tracked down and punished if they downloaded the Windows source code. They pulled out their full arsenal to try to stymie the spread of the leaked source code, even getting the FBI involved and dedicating resources to finding out who was responsible for the leak. I was amazed at this response, considering the fact that you can find several different versions of Windows and Office (including server and corporate editions, alpha and beta test copies, activation code generators and cracks for activation procedures) on these same networks — and they’ve been available for years without this kind of reaction from Microsoft. If Microsoft is capable of such measures, why doesn’t it go to that degree to stop the illegal distribution of binary copies of Office and Windows? Ruling out the possibility of being unable to accomplish a crackdown on illegal distribution, that leaves two possibilities: they are unwilling to act, or they are apathetic about the situation and not very serious about attacking software “piracy.” The former implies that they receive some benefit from “piracy” and the latter implies that they aren’t significantly affected by illegal distribution.

The secret may be that big software companies don’t really want to stop illegal distribution because it doesn’t affect their paying customer base. People who most often pay for expensive proprietary software are in businesses that need it to operate or make money; home users rarely will shell out hundreds or thousands of dollars for software that they will barely use or couldn’t otherwise afford. In other words, those who are “pirating” are not generally people who would be paying for the same software. If this is the reality of the software world, why wouldn’t companies like Microsoft want to make a considerable reduction in price — or give the software away for free — for noncommercial use? Why not make less money rather than no money? Some software companies already do this, but the biggest ones do not.

There are many people who justify their own software “piracy” by saying that it hurts companies like Microsoft, which are generally considered immoral and “evil” by those who gladly distribute and install proprietary software illegally. The irony of the situation is that it likely does more to help big software companies by improving their installed base percentage (the number of computers in the world that use the software) without generating any costs. In the long run this may help improve market share by selling upgrades to people who have previously used “pirated” software.


Imagine walking into a hardware store to buy some tools and supplies for making a shed. You bring your selected products to the counter and prepare to pay for them, but the clerk won’t take payment until you’ve agreed to certain terms and conditions: You can’t lend your new tools to your friends or family members; the tools can only be used to build the shed, and nothing else; the shed must follow one simple blueprint and may not be altered or painted; only you may enter the shed when it is complete; you may not rent out the shed or lend it to others; you may not buy other materials and make an identical shed using the same blueprint; if the shed collapses due to poor design or flawed materials, you may not collect damages from the company who designed the blueprint or made the wood. If you don’t agree to these terms you can’t buy the products, and if you buy the products and then violate the terms of the agreement you face astronomical fines and possibly jail time. Would you walk out of the store empty-handed, seeking a more liberated solution that fits your needs? Or would you buy the materials, resigned to the fact that your shed will not be as useful to you as you’d hoped?

Such is the dilemma with software licensing. Software is a tool that we use to help us be more useful and to improve our lives in many ways, and we should be able to use this tool in any way that we see fit. I have stopped jumping through the EULA hoops that big software companies put in front of me because I know that there are alternatives that don’t tie me down and rob me of my rights as an end-user. If you don’t agree to the license, don’t lie and say that you do — refuse to use the software and demand a refund.

Copyright 2004 Jem Matzan. Verbatim copying and redistribution of this entire article are permitted without royalty in any medium provided this notice is preserved.

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